Can Asia still trust America?
AT THE conclusion of the leaders’ summit of the AsiaPacific Economic Cooperation (APEC) in Peru last week, the Pacific Rim trade group reasserted the importance of free trade in a joint communiqué. The APEC economies, including the United States, further committed to “keep our markets open and to fight against all forms of protectionism” – an intentional pushback to the growth of protectionist rhetoric, especially from the incoming US administration.
President-elect Donald Trump has vowed, most recently in a YouTube video released on Monday, to make America’s withdrawal from the TransPacific Partnership (TPP), the US-led flagship free trade deal in the Asia-Pacific, a top priority for his administration. Trump’s vitriol has already eliminated any chance that Congress will ratify the pact during the remaining lame-duck period of the current administration.
America’s credibility in the region is already crumbling before the TPP’s official burial. The almost certain failure of the deal – at least in its current form – is a body blow to key US allies, especially Japan, and other important regional states in Southeast Asia, such as Vietnam and Singapore, that viewed the deal as the litmus test of Washington’s commitment to Asia. Singaporean Prime Minister Lee Hsien Loong put it best on the potential of the TPP failing: “It is your credibility as an ally [that is at stake]. How can anyone believe in you anymore?”
Indeed, the election of Trump has rattled US friends and allies in the Asia-Pacific who are worried that the incoming administration might signal Washington’s gradual retreat from the region. The range of concerns among US allies, such as Japan and South Korea, is vast: from the questioning of alliance burden-sharing, to the new administration’s plans for North Korea, or the black box that is Trump’s strategy – or lack thereof – for dealing with China.
But the most critical of these issues is the likely death of the TPP, which sounds the knell for Washington’s wider strategic plans. Specifically, it marks a fatal blow to President Barack Obama’s “rebalance” to the Asia-Pacific. This was a policy grounded on three legs – economic, diplomatic, and security – but the economic foundation, and arguably the most critical strategic element, was the TPP, a 12-country deal that encompasses nearly 40 percent of the world’s gross domestic product. The TPP was meant to bridge the gap and connect Washington’s Asia policy into a longterm strategy, binding the region not only to the United States, but also enhancing regional economic interdependence and cooperation.
Rather than rely on the traditional “hub and spoke” model of US engagement in Asia that focuses on bilateral relationships and alliances, the TPP is meant to support a more integrated and overlapping diplomatic and economic network – led by the United States – that connects like-minded countries in the region. The prospect of this network was especially enticing for most states in the region. Although they have deep interests in nurturing economic ties with China, they are desperately looking for a hedge to the emerging Sino-centric economic order in the region.
There is no question that the TPP’s failure is a boon to Beijing, which held deep suspicion of US efforts to push the deal and resented its framing, which many there believed was intentionally anti-China. Obama tried to promote the deal at home by stressing that the TPP would avoid a situation where “China gets to write the rules” in the region. Beijing saw the TPP as a thinly veiled complement to the Obama administration’s securityheavy “rebalance” – all aimed at containing China’s rise.
This dissipation of US credibility will be most acute in Southeast Asia, where the TPP originated. The failure of the United States to follow through on its commitments to economically engage with the region will result in weakened relationships. While the United States theoretically has two treaty allies in the region, the Philippines and Thailand (non-TPP members), these relationships are fragile and have become the Achilles’ heel of Washington’s security network in Asia due to the emergence of strong-man politics in both states – a military junta in Thailand and an erratic nationalist president in the Philippines
The TPP was important because it targeted less established relationships in Southeast Asia with key emerging states such as Vietnam and Malaysia. Trade was the effective unifier for many states here who craved stronger ties with Washington but did not want to fully join in on containing China. The capital developed through the promise of the TPP helped nurture Washington’s relations with the region – as evidenced by the unprecedented growth in the defence relationship with Vietnam.
None of this is now likely to happen. While Trump’s eventual landing spot on regional security issues remains uncertain, his economic views are clear. He has labelled the reform of international trade policy, including not just the TPP but also the North American Free Trade Agreement, a top priority for his administration.
Most of Trump’s critique on the TPP focuses on its alleged bolstering of Asian economies at the expense of American jobs. This protectionist argument holds little water, considering that higher-paying jobs in US companies are largely supported by Washington’s ability to sell exports overseas. The TPP, in addition to other free trade agreements the United States has in force, would allow the US lower tariffs and barriers to free trade in the dynamic Asia-Pacific region. According to an analysis by the Peterson Institute for International Economics, the TPP would provide an estimated $131 million increase in real income in the United States by 2030. This would also be complemented by an estimated $357 billion growth in exports by 2030 as a result of a completed pact.
In addition to the economic dividends, the TPP differs from other large trade agreements as a result of its commitment to setting a standard for high-level free trade, which took years of gruelling negotiations to establish. Essentially, the TPP is intended not just to lower tariff rates and provide market access, but to go the extra mile by insisting on intensive structural and regulatory reforms among the signatories. Many of these commit- ments for reforms come at a high political cost for US allies, like Japan, and emerging friends in the region, like Vietnam, who are now stuck with a decision on whether to scrap the deal they invested so much time and capital in, or accept a “TPP-lite” without the United States for the foreseeable future.
The step backward on the TPP has re-energised agreements largely led by China, including the Regional Comprehensive Economic Partnership (RCEP). While the memberships of the TPP and RCEP include a large overlap, the most striking difference is the absence of China in the former, and the United States in the latter. Beijing is also likely to push harder on its economic plans for the region by promoting its Asian Infrastructure Investment Bank and One Belt One Road infrastructure initiative. Beijing may also look to pry away US influence in the region through work to finalise its trilateral trade negotiations with Japan and South Korea. China already inked a bilateral deal with South Korea in 2015. Other possible avenues would be the Free Trade Agreement in the Asia-Pacific – an idealistic APEC-led initiative that would include both the United States and China, but one that seems even less likely than the TPP.
The failure of US commitment on the TPP erodes the legacy of Obama’s signature foreign-policy initiative, the rebalance to Asia. It also leads to uncertainty in the region on where to look for leadership. Japanese Prime Minister Shinzo Abe, who was originally opposed to the TPP, has ironically become the deal’s most prolific salesman. “Success or failure will sway the direction of the global freetrade system and the strategic environment in the Asia-Pacific,” he said. The warning is not just a ploy to stoke fear in Washington, but represents the concerns of many of Washington’s most trusted friends in the region. Trump should consider the consequences.